India’s Demographic Dividend: A Synthesis of Issues and Challenges

Abstract

India has a potential demographic dividend, as more than three-thirds of its growing population is in the working-age group of 15-64 years. Historical experience as well as cross-country evidence show that a vibrant, labor-intensive manufacturing sector is a pre-requisite for maximizing a country’s demographic dividend. This paper provides a synthesis of the vast literature related to the subject. The paper does use a fair amount of quotes from the existing studies relating to the subject in an effort put ‘the right pieces in the right places’. The key conclusion of the paper is that India is far from maximizing its demographic dividend. Therefore, there is much merit in the policy makers considering four sets of economic reforms to boost the labor-intensive segment of  India’s manufacturing sector: liberalizing external trade; attracting foreign investment; deregulating domestic labor  laws; and keeping up India’s traditional strength in IT-related services.